The following unaudited pro forma condensed consolidated statement of operations have been prepared to assist you in your analysis of the financial effects of the sale of the Purchased Assets, and have been presented in accordance with U.S. generally accepted accounting principles. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2018 combines the historical results for Ligand for the twelve months ended December 31, 2018 and the pro forma adjustments as if the sale of the Purchased Assets had occurred on January 1, 2018. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2018 gives effect to the sale of the Purchased Assets as of such date. Our accounting for the pro forma adjustments is preliminary pending completion of several elements, including finalizing after-tax gain on the sale of the Purchased Assets. Accordingly, there may be material adjustments to the pro forma adjustments.

This pro forma financial information does not purport to represent what our actual results of operations or financial position would have been had the sale of the Purchased Assets occurred on the dates indicated nor is the information necessarily indicative of future operating results. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this Form 8-K. You should read our pro forma condensed consolidated financial information in conjunction with our consolidated financial statements and the related notes, our “Selected Consolidated Financial and Operating Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which all appear in our Annual Report on Form 10-K for the year ended December 31, 2018.

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1

LIGAND PHARMACEUTICALS INCORPORATED

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

(Unaudited, in thousands, except per share amounts)

Historical

Pro Forma

Pro Forma

Ligand

Adjustments

Revenues:

Royalties

$

128,556

$

(99,300

)

(a)

$

29,256

Material sales

29,123

29,123

License fees, milestones and other revenues

93,774

93,774

Total revenues

251,453

(99,300

)

152,153

Operating costs and expenses:

Cost of material sales

6,337

6,337

Amortization of intangibles

15,792

15,792

Research and development

27,863

27,863

General and administrative

37,734

500

(b)

38,234

Total operating costs and expenses

87,726

500

88,226

Gain from sale of Promacta license

—

(827,000

)

(c)

(827,000

)

Income from operations

163,727

727,200

890,927

Other income (expenses):

Gain (loss) from Viking

50,187

50,187

Interest income

13,999

13,999

interest expense

(48,276

)

(48,276

)

Other income (expense), net

(6,307

)

(6,307

)

Total other income (expense), net

9,603

—

9,603

Income before income taxes

173,330

727,200

900,530

Income tax expense

(30,009

)

(152,267

)

(d)

(182,276

)

Net income:

$

143,321

$

574,933

$

718,254

Net income per common share:

Basic

$

6.77

$

33.94

Diluted

$

5.96

29.84

Weighted average per common share:

Basic

21,160

21,160

Diluted

24,067

24,067

2

LIGAND PHARMACEUTICALS INCORPORATED

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2018

(Unaudited, in thousands)

Historical

Pro Forma

Ligand

Adjustments

Pro Forma

ASSETS

Current assets:

Cash and cash equivalents

$

117,164

$

827,000

(c)

$

944,164

Short-term investments

601,217

601,217

Investment in Viking

46,191

46,191

Accounts receivable, net

55,850

55,850

Inventory

7,124

7,124

Derivative assets

22,576

22,576

Other current assets

20,418

20,418

Total current assets

870,540

827,000

1,697,540

Deferred income taxes, net

46,521

(46,521

)

(e)

—

Intangible assets, net

219,793

219,793

Goodwill

86,646

86,646

Commercial license rights

31,460

31,460

Property and equipment, net

5,372

5,372

Other assets

471

471

Total assets

$

1,260,803

$

780,479

$

2,041,282

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

4,183

$

500

(b)

$

4,683

Accrued liabilities

19,200

19,200

Income tax payable

—

100,558

(e)

100,558

Current contingent liabilities

5,717

5,717

Deferred revenue

3,286

3,286

Derivative liability

23,430

23,430

2019 convertible senior notes, net

26,433

26,433

Total current liabilities

82,249

101,058

183,307

2023 convertible senior notes, net

609,864

609,864

Deferred income taxes, net

—

10,693

(e)

10,693

Long-term contingent liabilities

6,825

6,825

Other long-term liabilities

951

7,222

(e)

8,173

Total liabilities

699,889

118,973

818,862

Total stockholders' equity

560,914

661,506

1,222,420

Total liabilities and stockholders' equity

$

1,260,803

$

780,479

$

2,041,282

3

(a) To reflect the elimination of the Promacta license revenue during the period presented.

(b) To reflect the additional transaction costs in connection with the sale of the Purchased Assets during the period.

(c) To reflect the cash proceeds received upon the sale of the Purchased Assets.

(d) To reflect the related income tax expense in connection with the sale of the Purchased Assets.

(e) To reflect the estimated tax adjustments in connection with the sale of the Purchased Assets. The estimated after-tax gain on the sale of the Purchased Assets as if the transaction had closed on December 31, 2018 is approximately $643 million and is included in the stockholders' equity of the unaudited pro forma condensed consolidated balance sheet as of December 31, 2018. The actual gain will be determined as of March 6, 2019, the closing date, and could be materially different from this estimate.